The learning objectives for this article are to:
- To understand what the buy-to-let market is like in the current environment
- To be able to describe the differences between a short-term and long-term buy-to-let investment
- To understand local markets and how they differ from region to region
Investing in property carries inherent risks, and with impending changes in landlord regulations and market fluctuations, it can seem especially daunting. Making decisions about when to buy only adds to the complexity, but understanding how to interpret the market makes it easier to make an informed decision.
What’s the market like right now?
Despite some bumps in the road regarding mortgage rates and lenders pulling deals from the market after Kwasi Kwarteng's 2022 mini budget announcement, investors can take comfort in the fact that the situation appears to be stabilising. Unfortunately, interest rates on buy-to-let mortgages have increased since the beginning of 2022 after what were historic lows. Existing fixed rate mortgage holders won't see any changes in their finances for now, but those looking to buy or refinance soon will probably face fewer options and higher rates for a while.
It's not all bad news. With the closure of the Help to Buy scheme, there may be a higher number of first time buyers waiting to enter the housing market without the means to do so immediately. As a result, they could turn to rented accommodation as an alternative to purchasing. This is good news if you’re a landlord or are considering becoming one.
Are you looking for a long or short-term buy-to-let investment?
While a transient first time buyer may only be a temporary tenant, it could be enough for you to get your foot in the door, giving you the opportunity to consider your future property investment plans.
Consider how long you want to be a landlord for, as this could impact whether it’s a decision you want to make right now. If you don’t need easy and immediate access to the money you’re investing, then making a long-term investment is a good option. However, if you’re in it for the short-term, then you may be subject to fluctuating house prices. That’s not to say that a return on your investment isn’t still possible, just less likely.
Understanding your local market
With property investment, planning is essential, and having a good understanding of the local market is invaluable, as each region has its own unique characteristics.
To get a sense of demand in your area, consider speaking to other landlords and estate agents, and join and engage with online forums. Conducting research and consulting with local experts can help you make an informed decision about what will work best for you. For instance, you may discover that it's worth buying a property a bit farther from your initial plan if the rental market is flourishing in that area.
Landlord responsibilities
Don't forget that your primary aim as a landlord is not just about earning a profit, but also providing your tenants with safe and secure accommodation. To ensure that you are equipped with the knowledge and skills necessary to fulfil your responsibilities as a landlord, read and learn as much as you can before you jump in, and stay up-to-date with new regulations and rules.
Get the right mortgage advice
If you’re thinking about becoming a landlord, we recommend you sit down with a mortgage adviser to run through your finances, the type of property you want to buy, and the rental returns you could generate.
To recap, this article has helped you...
- To understand what the buy-to-let market is like in the current environment
- To be able to describe the differences between a short-term and long-term buy-to-let investment
- To understand local markets and how they differ from region to region
